“What is a Perk” Survey Results

In the wake of the adoption of comprehensive new executive compensation disclosure rules by the SEC, which become effective early next year, we conducted an informal What is a Perk survey of the lawyers and other advisors that regularly use CompensationStandards.com to see how they interpret the SEC’s new rules. As with any new rulemaking of the magnitude of these rules (the adopting release was more than 400 pages long), there always remain numerous open issues that lead to a mad rush to figure out the nuances.

Of course, perk disclosure is highly sensitive for senior managers, as quite a few excesses are likely to be exposed when these SEC filings are made during 2007. So the answers to the survey questions below are quite meaningful to both managers and shareholders alike. The survey results are quite lengthy and come with the important disclaimer that they do not necessarily reflect what the new law will actually require. In fact, I interpret these survey results to mean that more guidance from the SEC Staff on many of these issues is badly needed. The Staff has promised some guidance soon, but it’s unclear if that guidance will deal with these challenging perk issues.

Some key findings of the survey are summarized here, and include:

1. Travel costs associated with spouse attendance with directors at annual board retreat/meeting where all spouses are invited:

– Definitely a perk – 37.4%
– Leaning toward a perk – 28.2%
– Leaning toward not a perk – 18.7%
– Definitely not a perk – 15.8%

2. Country club membership paid by company that is not used exclusively for business purposes, if the membership is used a few times by the executive or a family member for personal reasons:

– Entire amount of country club expenses is a perk – 26.6%
– Allocate incremental cost of those few personal uses as a perk – 47.6%
– Allocate all expenses, including a portion of the membership cost on some basis, as a perk – 22.5%
– Not a perk – 3.3%

3. Would your answers change to the above questions if the executive paid the full incremental cost to the company?

– Yes to most – 44.2%
– Yes to a few – 27.9%
– Maybe for a few – 11.1%
– No – 16.8%.

The full results of the survey can be found here.